'No gas supply shortage forecast,' energy operator says

A commitment from producers to increase domestic gas supplies after government threats to curtail exports will stave off gas shortages until at least 2030, a new report shows.

The Australian Energy Market Operator’s 2018 gas outlook for the east coast said the forecast domestic gas shortfall that was predicted late last year by the Australian Competition and Consumer Commission had now been averted.

The ACCC forecast gas shortages of between 55 and 108 petajoules if more domestic supplies weren't immediately secured. Credit:John Woudstra

“There are no gas supply gaps forecast in 2019, or in the short term, under expected conditions,” AEMO said.

Victoria had been predicted to face the worst shortages from 2021 onwards unless new gas supplies could be found.

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AEMO said the potential crisis had been averted due to gas producers committing to increase domestic supplies after the Turnbull government threatened to forcibly reduce export levels combined with less use of gas-fired power stations, as well as a short-term oversupply of LNG in Asia-Pacific, which reduced the demand for Australian gas to be sent overseas.

“A change in international market dynamics, lower demand for gas-powered generation, new pipeline interconnections and the Federal Government’s Australian Domestic Gas Supply Mechanism have delivered an improved outlook for Australia’s east coast gas markets,” it said.

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AEMO’s head of planning and forecasting, David Swift, said there is now more gas than previously predicted.

“Coupled with the current supply conditions on the east coast, this will mean that LNG producers wil be able to provide up to eight petajoules more than previously expected to the domestic market,” Mr Swift said.

AEMO said that a boom in renewable energy generation may further reduce domestic gas demand but that it will remain an important source of back-up power when the sun isn’t shining or the wind isn’t blowing.

“With over 4000 megawatts of wind and solar coming online in the next two years, our forecasts show that gas powered generation demand could be even lower than projected in our 2017 forecasts, as the role of gas transitions to focus more on meeting demand when renewable generation is low,” Mr Swift said.

“However, an increased need for gas due to weather related or contingency events could still adversely impact this forecast, and tighten the supply demand balance once again.”

AEMO forecast that new gas infrastructure will need to be built from 2030 to continue to meet the east coast’s ongoing demand.